Best Interest Rates on Cash – November 2017

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Interest rates are slowly inching upwards. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. I focus on rates that are nationally available to everyone (not restricted to certain geographic areas or specific groups). Rates checked as of 11/1/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, there are many online savings accounts offering competitive rates clustered around 1.1%-1.3% APY. Remember that with savings accounts, the interest rates can change at any time.

  • Top rates: DollarSavingsDirect at 1.50% APY. SalemFiveDirect at 1.50% APY. Redneck Bank and All America Bank (they are affiliated) having Mega Money Market accounts paying 1.50% APY on balances up to $35,000.
  • More rates from banks with solid history of competitive rates: CIT Bank at 1.35% APY up to $250k, Synchrony Bank at 1.30% APY, GS Bank at 1.30% APY, and UFB Direct at 1.41% APY ($5k min).
  • I’ve experienced the “bait-and-switch” of moving to a new bank only to have the rate lowered quickly afterward. Until the rate difference is huge, I’m sticking with a Ally Bank Savings + Checking combo due to their history of competitive rates (including CDs), 1-day interbank transfers, and overall user experience. I also like the free overdraft transfers from savings that let’s me keep my checking balance at a minimum. Ally Savings is at 1.25% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have inched upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF. The following bond funds are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free commissions, it may be worth a look.

  • Vanguard Prime Money Market Fund currently pays an 1.13% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund, which has an SEC yield of 0.99%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.57% SEC Yield ($3,000 min) and 1.68% SEC Yield ($50,000 min). The current average effective duration is 1 year.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.54% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.62% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (1 year and under)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My standard advice is to keep things simple. If not a savings account, then put it in a short-term CD under the FDIC limits until you have a plan.

  • Ally Bank No-Penalty 11-Month CD is paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The CIT Bank 11-Month No-Penalty CD is at 1.45% APY with a lower $1,000 minimum deposit and no withdrawal penalty seven days or later after funds have been received. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you can always jump ship if rates rise.
  • GS Bank’s 12-month CD is at 1.65% APY with $500 minimum. For sizeable balances, Advancial Federal Credit Union has a 6-month CD at 1.72% APY ($50k min) and a 12-month CD at 1.87% APY ($50k min). If you don’t otherwise qualify, you can join with a $5 fee to Connex Professional Network and maintaining $5 in a Share savings account. Via DepositAccounts.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between November 2017 and April 2018 will earn a 2.58% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. At the very minimum, the total yield after 12 months will be 1.29% with additional upside potential. More info here.
  • In mid-April 2018, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Northpointe Bank has Rewards Checking at 5% APY on up to $10k. The requirements are (1) 15 debit card purchases per month (in-person or online), (2) enrolling in e-statements, and (3) a monthly direct deposit or automatic withdrawal of $100 or more. ATM fees are rebated up to $10 per month.

Certificates of deposit (greater than 1 year)
You might have larger balances, either because you are using CDs instead of bonds or you simply want a large cash cushion. Buying finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider a custom CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Advancial Federal Credit Union (see above) has their 18-month CD at 1.96% APY ($50k min) and a 24-month CD at 2.04% APY ($50k min). The early withdrawal penalty is 180 days of interest.
  • Ally Bank also has a 5-year CD at 2.25% APY (no minimum) with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months you’d still get an 1.64% effective APY even after accounting for the penalty.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offers a 3% APY CU Thrive “starter” savings account with balance caps. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Mountain America Credit Union has a 5-year Share Certificate rate at 2.60% APY ($5 minimum) with a 365-day early withdrawal penalty. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.65% APY (Watch out for higher rates from callable CDs from Fidelity.) Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 11/1/17.


Premier High Yield Savings

Man Who Lived Alone on an Mediterranean Island For Nearly 30 Years

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Financial freedom means that you can do what you want. Now consider that if you earn like everyone else and spend like everyone, you’ll end up like everyone else. This is why unconventional people are the most likely to achieve early retirement. I sometimes envy those people who are satisfied with the idea of working 9-5 under a boss until you’re 65 years old. I just can’t do it.

This is why I like reading about unconventional people. Some readers couldn’t get past the fact that Christopher Knight lived alone in the Maine woods for 27 years stole things to eat. Well, here’s a NatGeo story about a person who lived alone on an island for 28 years completely legally. Via NextDraft.

78-year-old Mauro Morandi is the sole caretaker of an Mediterranean island that became closed to tourists after being designated a National Park. He feels very strongly about preserving the island’s natural beauty. He has a job and a purpose. He gets food delivered to him every two weeks and there are limited visitors, so he is not a complete hermit, but he is the island’s only permanent resident. Still, I observed a lot of common ground between these two people who both lived alone for nearly 30 years.

  • They enjoyed the silence. “What I love the most is the silence,” Morandi says. “The silence in winter when there isn’t a storm and no one is around, but also the summer silence of sunset.”
  • They never felt lonely. Morandi says he is always surrounded by life.
  • They made peace with the idea of dying alone. “I will never leave,” Morandi says. “I hope to die here and be cremated and have my ashes scattered in the wind.”
  • They were avid readers.
  • They never got sick. Morandi says he has never gotten sick and attributes this to his good genes. Knight never got sick either, but observed that germs come from other people. If you live alone, there is nobody to spread their foreign germs to you.
  • They view themselves as a small part of the world, not controllers of the world. “We think we are giants that can dominate the Earth, but we’re just mosquitos,” Morandi says.

Here’s another NatGeo story about an off-grid commune in North Carolina, but it didn’t interest me nearly as much. Is it really living off-grid when you live off of donated food and go back into town for WiFi? Is is really a commune when only one person stays year-round? It seems more like a place where people visit and play at being “off grid” for a few months before going back their traditional lives.

OhmConnect: Get Paid For Saving Energy One Hour Per Week

ohmlogoOhmConnect is a start-up that works with consumers and their local utilities to lower energy costs and save money together. Before reading any further, it appears that cash payments currently only work with customers of PG&E, SDG&E or Southern California Edison in California.

During times of high electricity demand, customers will get an email or smartphone app notification that it is time for an “#OhmHour”. During that time, customers will reduce their electricity demand by turning off lights and not using their A/C, heater, or other appliances. The utility saves money by avoiding having to turn on their dirty and expensive “peaker plants”. The utility pays OhmConnect, which in turn passes on 80% to you.

In exchange for your OhmHour participation, the customer will get paid cash via PayPal. Supposedly, you can earn up to $300 a year. If you connect any smart home devices like a Nest thermostat or an electric vehicle, you can earn extra bonuses and also automate your participation. OhmConnect participation is free and does not affect your existing utility service.

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I’ve been a member for a few weeks but it doesn’t seem to be very interesting if you are not an eligible California resident. I wish they would have been more upfront about that. You can rack up some “token”, but it’s not a meaningful activity unless they can track your energy usage reductions. At most, I’d sign up and get an alert if/when they spread to your area.

If you are a California resident and customer of PG&E, SDG&E or Southern California Edison, sign up for OhmConnect here and link your account and get a $5 bonus. Get a $20 bonus after linking accounts + a 1 kilowatt reduction during a single hour within 90 days. Get a $75 bonus if you link, do the 1kW reduction, and participate in 9 out of the last 10 #OhmHour events.

PSA: Cuisinart Recalls 8 Million Food Processor Blades

bladerecallIn case you missed it during the holiday rush, Cuisinart has issued a recall of over 8 million food processor blades in the US and Canada. This covers a huge chunk of their machines sold in the last 20 years, including the one in my kitchen. The riveted blades can crack over time and leave small metal pieces in your food (yikes!).

This recall involves the riveted blades in Cuisinart food processors with model numbers that begin with the following: CFP-9, CFP-11, DFP-7, DFP-11, DFP-14, DLC-5, DLC-7, DLC-8, DLC-10, DLC-XP, DLC-2007, DLC-2009, DLC-2011, DLC-2014, DLC-3011, DLC-3014, EV-7, EV-10, EV-11, EV-14, KFP-7 and MP-14. The model number is located on the bottom of the food processor. The blades have four rivets and are silver-colored stainless steel and have a beige plastic center hub. Only food processors with four rivets in the blades are included in this recall. Cuisinart is printed on the front and on the bottom of the food processors.

Cuisinart will send you a free replacement blade if you contact them through their website at recall.cuisinart.com or call them at 877-339-2534 from 7am to 11pm ET Monday through Friday and from 9am to 5pm ET Saturday and Sunday. They have not offered anything further such as partial refunds or reimbursements.

I submitted my information online and received a confirmation e-mail. They were very vague with how long it would take to send the new blades.

Thank you so much for registering to receive your free Cuisinart replacement blade. Our blades are fabricated using precise manufacturing processes, which of course means, that they take some time to produce. We are producing new blades as rapidly as possible to meet the demand resulting from this replacement program.

When your blade is about to be shipped, we will send you an email so you can anticipate when it will arrive to the address you indicated on your replacement blade registration. In the meantime, you are able to use all other cutting implements and accessories that may have come with your Cuisinart food processor.

Vanguard Managed Account Program (VMAP) Review – Cost vs. Benefits

savebuttonbankVanguard is the one of the biggest providers of defined contribution (DC) plans like 401(k) and 403(b) plans, with more than 3.9 million participants. An optional service they provide for these DC plans is managed account advice, where you pay them an asset-based fee and you cede all portfolio control to them. Vanguard Managed Account Program (VMAP) serves as a fiduciary that sets asset allocations, chooses investments, and monitors/rebalances portfolios on a continuing basis. Fees typically begin at 0.40% on the first $100,000 in assets under management.

Vanguard published a research paper on the before-and-after results from actual participants called The value of managed account advice [pdf].

Even if you aren’t considering paying for such a service, I figured there would be some worthwhile takeaways from their results. Here are my condensed notes from reading their paper.

Reallocation of company stock. About 12% of participants initially had a concentrated position of 20% or more in employer stock. Holding too much stock in your employer is generally understood to be too risky, so VMAP fixes that. The average allocation to company stock fell from 46% to 4% as a result of managed account advice. This group was probably impacted the most by professional advice.

Personalized advice. Not only do you simply indicate an expected retirement age and desired level of risk, but you can add outside assets to the overall asset allocation evaluation. 35% of all VMAP participants personalized the service in some manner.

Forcing you to make savings rate decision. When you sit down and start this service, you have to talk about your goals and see some projected numbers. Then you must make a decision as to your savings rate. Overall, people saved more once faced with this situation. Specifically, 1/3rd of participants increased their savings rates, 7% decreased them, and the remaining majority maintained contribution rates at the same level. See chart below:

vmap_savings

More appropriate asset allocation. In terms of asset allocation, VMAP made things more appropriate and efficient in relation to the need and ability to take risk. Some people got more equity exposure, some people got less. On average, people were told to hold less employer stock, less cash, and more international stocks. See chart below:

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Net effect on retirement wealth. Let see. On average, VMAP participants saved more money. On average, expected returns on VMAP-advised portfolio rose. On average, expense ratios on VMAP-advised portfolio were reduced by 0.06%. But everyone also paid advisory fees. What happens when you take all the factors together? In their own words:

To summarize the interplay of these effects, we used the change in participants’ projected ten-year real retirement wealth as a benchmark for evaluating advice. This allowed us to observe the true effect of managed accounts, independent of the participant’s starting account balance or asset allocation.

On average, managed account participants experienced a relative increase of 15% in projected retirement wealth over 10 years. I’m a little disappointed in “projected” wealth increase vs. actual wealth increase, but I think that’s the best they could do with their limited data set. In order to better see how this works, they broke things into ten equal groups, or deciles, based on the change in retirement wealth. This chart includes the 88% of participants that didn’t have a huge chunk of company stock to start with.

vmap_deciles

As you can see, the bottom decile is mostly affected by the fact that they simply chose to save less money (lower annual contribution rate) and they lowered their stock exposure (lower expected real return). I can only guess that these folks needed to lower their risk levels to a more appropriate level. The top decile both chose to save more money and increased their stock exposure.

Summary. Each of the factors listed above could all be converted to standard advice, i.e. “Things an Investor Should Do”. You should make sure not to hold too much company stock. You should assess your situation, and increase your savings rate if needed. You should make sure your asset allocation is appropriate for your age and risk requirements. Yes, a DIY investor could certainly do these things for themselves. But have you? Will you?

This part is purely my opinion, but how about a general rule, if you haven’t done these things in the last 3 years, perhaps paying for advice may just be worth it? For example, if you’re holding more than 30% of your portfolio in company stock, and haven’t gotten rid of it in the last 3 years, maybe you need someone to do it for you.

Chase Premier Checking Review: $300 Bonus Promo

Chase Bank has a new $300 bonus for their new Premier Checking account. This is a separate bonus in addition to their Chase Total Checking $150 + Chase Savings $100 bonuses. Although the bonus for this product is higher, it comes with both higher fees and more features, so it won’t work out to be better for everyone.

Rules of the $300 bonus promotion:

  • Open a new Chase Premier Plus Checking Account
  • Deposit $25 or more at account opening
  • Have your direct deposit made to this account within 60 days of account opening. Chase states that your direct deposit needs to be an electronic deposit of your paycheck, pension or government benefits (such as Social Security) from your employer or the government.

Offer not available to existing Chase checking customers, those with fiduciary accounts, or those whose accounts have been closed within 90 days or closed with a negative balance. You can only receive one new checking account-related bonus per calendar year. Bonus is considered interest and will be reported on IRS Form 1099-INT. If the checking account is closed by the customer or Chase within six months after opening, we will deduct the bonus amount at closing.

Premier Checking offers these additional features above Total Checking:

  • Get $300 when you open a new CHASE PREMIER PLUS CHECKINGSM account and set up direct deposit
  • Access 15,500 Chase ATMs and 5,400 branches
  • EXPLORE MORE OF THE WORLD AROUND YOU: with the convenience and ease of a Chase Premier Plus CheckingSM account
  • Chase QuickDepositSM lets you deposit checks almost anytime, anywhere with the ease of taking a picture. Just point, snap, and deposit.
  • Chase QuickPaySM lets you pay people without cash or checks. Use it to send money to virtually anyone who has an email address or mobile number.
  • Earns interest
  • No Chase fee on first four non-Chase ATM transactions

To avoid the $25 monthly service fee for Premier Checking, you must do at least one of the following:

  • Keep an average daily balance of $15,000 or more in any combination of qualifying Chase checking, savings and other balances; OR,
  • Have automatic payments to your qualifying linked Chase mortgage from your Chase account. Payments set up through Online Bill Pay do not qualify. Mortgages must be in good standing and be first mortgages with servicing retained by Chase.

The additional features of the Premier checking aren’t really worth very much due to the low interest rates offered. Maybe the ATM fee waivers are worth something, but that depends on the person. I would only consider this bonus if you can waive that $25 monthly fee as noted above (ideally, you already have a Chase mortgage). Otherwise, the incrementally higher $300 bonus would be offset by the service fees. In that case, I would look into the Chase Total Checking + Savings package instead.

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.  “The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.”

Berkshire Hathaway Official Reading List 2015: Approved Books by Buffett and Munger

tapdaceAmong the many booths at Berkshire Hathaway’s 2015 Annual Meeting was one run by a local bookstore. Each year, BRK approves a list of books, many of which have been mentioned in shareholder letters or other speeches by Warren Buffett and/or Charlie Munger. I always see media articles referring to this list (ex. 11 Picks from Warren Buffett’s Bookshelf), but here is the entire official list from The Bookworm.

“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.” – Warren Buffett

Besides the well-known Buffett biographies and classic investing books, it still manages to include several investing books I’d never heard of before, as well as some intriguing non-investing books by Buffett’s siblings and children. There is even a comic book and a separate section for kids. Here’s the Amazon-linkified list, sorted by category in alphabetical order.

About Warren Buffett

About Charlie Munger

On Investing

General Interest

Family and Children’s Interests

Big Picture Financial Advice from Jonathan Clements

clementsbookHere is some “big picture” financial advice from author and columnist Jonathan Clements. I’d like to collect enough of these tips from notable people and make a compilation post.

Clements recently wrote his last column “How to Live a Happier Financial Life” for the Wall Street Journal Sunday (which is ending publication), but he’ll still be writing for the main Wall Street Journal (on Saturdays). I’ll just paraphrase the bullet points below; read the full article for the details.

  • The biggest waste of time is commuting.
  • The best investment attribute to have is humility.
  • The biggest key to financial success is cheap housing.
  • The best way to spend money is to buy experiences.
  • Your top financial goal should be to have the ability to do fulfilling work, as opposed to working solely for a paycheck.

I guess he’s a sentimental guy because he also wrote a “last column” called “Parting Shot: What I Learned From Writing 1,008 Columns” in 2008 when he left the Wall Street Journal to join Citigroup (before coming back). Highlights below; read full article for details.

The question – What is the reason for all this saving and investing?

  • If you have money, you’ll worry less about it.
  • Money can give you the freedom to pursue your passions.
  • Money can buy you time with friends and family.

I checked and both articles weren’t behind a paywall at the time of writing, but that may change in the future.

Season’s Greetings!

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Thank you very much for reading My Money Blog this year. It’s now been over 10 years… where has the time gone! I still look forward to learning and sharing something new every day. Here’s hoping that you are happy, healthy, and moving ever closer toward your goals.

Remember that you can follow updates via RSS feed, daily e-mail subscription, following me on Twitter, or liking my Facebook page.

TradeKing Black Friday $50 Promo

TradeKing has a $50 bonus promotion for Black Friday weekend. More details via banner below. Use promo code BF50. You must open with $3,000 and make 3 trades. Offer expires on December 1st, 2014 at midnight.

New Site Design

Just a quick note that I finally updated this site’s design after many, many years. The primary goal of this redesign was to improve usability and readability across modern computer screens, which now span from 30″ widescreen monsters to 3.5″ smartphones. I’m also trying to improve navigation so that readers can easily find the more timeless posts amidst the many other time-sensitive posts. I still have a lot of work to do by going through my archives and cleaning things up.

Please let me know if anything is broken or just what you think of it. Thanks!

MyMoneyBlog.com Interview with Mint

Money management website Mint.com recently did a brief interview with me, although we did cover a variety of topics. Here’s the link:

Personal Finance Interview with Jonathan Ping on Money Management